Sanjeev Ahluwalia | The growth of India’s flagging: Key Govt Challenge storm

The main challenge before the government of Narendra Modi is to reconcile the stressful investments and institutional requirements of high growth without risking a political setback. The previous story is of a generous government, such as a “flow of wealth”, which is available to its topics with a consistent, albeit flat growth strategy, based on the assignment of existing resources rather than discovering new fiscal resources.

In the future, the income does not have to be expanded significantly-even by the privatization of government companies, the sale of government funds and the FLAB in the government’s social welfare programs, which are reduced to the risk of annoying important voter bases. Keep in mind that US President Donald Trump is devastating Doge to rationalize the government’s expenditure and finance because he only has a four-year term. This is a difficult option for every government that hopes to stay in power for decades.

To be fair, the government of the Prime Minister Modi used the tax revenue well. But it is also super efficient to distribute troubles. A 2022 -paper from Bhalla, Bhasin and Virmani attributes you to reduce extreme poverty to a border level of one percent of the population in a poverty line of PPP $ 1.90 per person per person. The World Bank estimates that the poverty limit of $ 2.15 per day was poor in 2021. After 2012 there is no official count of the poor in India, since the 2018 census was not acceptable for the government.

Doles significantly reduce poverty: the main mechanism for this sharp drop in poverty is to give 800 million people or more than half of the population free food. Further measures include special money transfers for women, farmers and age. In addition to the public health system, the public health system works free of charge or at rock boat fees. A mere sick health insurance program is also available that enables access to the emerging private health facilities in the entire value chain from clinics to small hospitals to multi-specialty wellness centers and hospitals. In addition, free or cheap electricity and water supply for small customers and farmers and the glass of the giveaway are overcrowded.

Efficient welfare delivery creates fiscal space for investments: The update of poverty estimates is crucial for the mood of efficiency with which doles are designed and transmitted. The forensic testing of welfare systems can determine which systems are required to keep the lower 10 percent above the poverty limit over the income, and to create a progressive implementation strategy in order to exterminate the beneficiaries if they are better off. Second, a backstop strategy for the next 20 percent that has completed poverty is necessary to stop it back. Families refer to poverty quite often. The sudden loss of a job (India has no unemployment benefits) or the wage earner, who becomes seriously ill, or his death or poor leadership within the family leads to inability to keep children at school, fertilized learning, well lined and socialized. Specific public support systems range from direct cash subsidies that occur when a red flag is increased, up to support support in community support that mix the local leadership with public financial support to ensure the protection of families when natural, medical or personal disasters go on strike.

Decentralized well -being and management: a relevant topic is who should be the main weighing for monitoring the broad spectrum of social well -being. It is an aberration of the Indian institutional system that the Union’s government plays a major role in these sectors. The constitution stipulates that the states and not the Union government are responsible for social responsibility

Welfare measures. Since the union government in India is tax -dominant, it traditionally went far beyond its central sovereign mandate – defense, diplomacy, financial management, internal security, regulation of network services, determination of environmental policy and national standards and administration of large minerals.

It is also true that the governments of the states were generally not efficient in the tax survey or the efficient management of capital allocation. Examples of their inefficiency. Property tax revenue is a fifth of the global comparators, even if real estate prices have increased. They have neither made agriculture – a state topic – competitive worldwide, nor do they control income from agriculture. Most states are unable to receive their electricity distribution and the water supply companies for water supply in order to meet their expenses by calculating normative costs at costs. Some states were to the tax -ruinous pension systems in 2022 instead of implementing the tax -sustainable “defined contribution contribution” pension programs in 2004. However, the former employees will impose higher costs for the government budget.

GDP growth higher than comparier: GDP growth in the third quarter (October-December) of this financial year with 6.2 percent is higher than the average of the first two quarters. The IMF (update January 2025) estimates annual growth in India with 6.5 percent. This implies a required growth rate of around 7.7 percent in the last quarter, which is high growth of 7.3 percent in the fourth year of the previous financial year. However, this was before Trumpian Global Disruption, important downturns of the global stock markets, including in India, and uncertain expectations of global inflation.

On a relative basis, an annual real GDP growth of 6.25 to 6.5 percent is a positive result, since the IMF expects global growth of 3.3 percent and the growth of emerging and developing Asia – the fastest growing segment – with 5.2 percent. The dissatisfaction is, if at all, to India’s own medium -term growth expectations.

The increase in global uncertainties must be managed in real time. The government can only be prepared and is to remain fiscal. The reduction of the fiscal deficit under the Tax Responsibility would confirm for 2025-26 and among the four percent of the GDP insured until 2026-2027.

Keep the resources in reserve to manage uncertainty: Avoid temptation to use public resources through borrowing. Conservative budgeting prefers to treat state governments, as expected, in order to treat the implementation efficiency identified by digital monitoring. Bravado is like the assumption that inflation is under control today, a fundamental misstep. Foreign portfolio investors (FPIs) have withdrawn around 3 trillion rupees in the last six months from the Indian stock markets worth around 384 trillion rupees or 110 percent of GDP, which were frightened by strengthening the dollar and inflation of the effects of global uncertainty on India. The signed commitment of the Prime Minister Modi in 2014 was that his “reporting card” would be. In order to achieve higher grades and avoid that the “subordinate” build high edges to target. We’re not there yet.

The writer is a former IAS officer and expert in governance and economic regulation